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Detroit Free Press Staff Writer

A report that Detroit emergency manager Kevyn Orr will deliver to the state Monday will portray the city’s financial condition as graver than anticipated, with the city’s long-term debts higher than previously reported, its revenues sliding and its accumulated deficit ballooning, according to people familiar with the document.

But the report won’t be packed with specific solutions for pulling Detroit out of its financial tailspin nor Orr’s plans for a top-down restructuring of city government, said his spokesman, Bill Nowling.

“This is going to be the ‘source of truth’ document,” Nowling said Friday in describing the purpose of the report. “This is what we’re going to go back to when we sit down with employees and retirees and we say we have to reorganize. Same thing with our creditors. These will be the numbers we’ll be working from.”

Public Act 436, the state’s emergency manager law, directs emergency managers to come up with a financial and operating plan after 45 days in office but doesn’t give exact specifications on what must be in the report.

The contents of the report have been closely guarded, but Nowling said the report will lay out the clearest picture yet of a city perilously close to bankruptcy, drowning in deficits and long-term obligations to bond holders and retirees, which further threatens Detroit’s ability to provide basic public services.

Various reports from actuaries hired by the city have put retiree obligations and bond debt as high as $17 billion to $22 billion. Without going into specifics, Nowling confirmed as “all true” speculation at City Hall about lower than expected revenues, a growing deficit and perhaps hundreds of millions of dollars more in bond debts and retiree liabilities than had been reported.

Orr’s office sought to brace the city’s leaders and its residents for the 50-page report that’s expected to be posted on freep.com Monday morning.

The city’s last report to the city-state Financial Advisory Board warned that Detroit’s deficit could hit $380 million by this summer. But political analyst Eric Foster, who sat on a working group of mostly African-American leaders from the city’s business, political, nonprofit foundation and faith sectors, said this week that Orr has told others the deficit could top $600 million.

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Foster said it was emphasized that Detroit has to negotiate with at least 44 bond holders and nine companies that insure the city’s bond debt, atop four dozen union bargaining units, some of which have 10 or fewer employees. The worry among bond holders and insurers is that Detroit might default, he said.

Orr’s report “will start a real conversation on how do we restructure the city so that the money coming in can be applied to services for residents and you can reduce the outlay” to bond holders, retirees, and city workers, Foster said. “This first report should be a very detailed, very sober description of where we sit. This is what we’re really facing.”

Detroit City Council President Pro Tem Gary Brown said he understands that the city is in bad financial condition, and even if the numbers are worse, he hopes Orr’s report contains significant suggestions for cutting the city’s costs quickly.

“I’m looking for real savings we can use in this year’s budget,” Brown said, “and that’s going to require a plan for how we create those savings so we can use the money to restructure city government.”

But Brown and several other council members said they hadn’t seen the report and didn’t want to comment on it before it’s released. Mayor Dave Bing’s office declined comment Friday, saying it would reserve comment until the mayor’s staff had time to review the full report.

Foster said he expects the report to muffle critics who argue that the state has exaggerated the extent of Detroit’s financial free fall and that the city would be in far better shape if it were given revenue sharing and back taxes owed by businesses and property owners.

“Even if you get those moneys, it won’t address what you owe,” Foster said. “It may address one year of structural deficits, but that’s it. You still couldn’t fund everything.”

Foster said Orr has been frank in talking with the working group about how a bankruptcy might help reduce debt payments, freeing up money to fund public safety, recreation and other crucial services, but it also has been discussed how California cities in bankruptcy, including Stockton, have had to make serious cuts in police and fire services even under Chapter 9 municipal bankruptcy protection.

“Obviously he’s been studying the situation even before his appointment, and I think that’s a good thing,” Foster said, adding that he expects the tone of the report to say the city is “continually hemorrhaging cash, and it can’t be addressed with small changes.”

Ken Harris, president and CEO of the Michigan Black Chamber of Commerce, said he hopes Orr is equally frank and open with residents and business leaders about what to do to turn the city around, no matter what else is in the report.

“We’re just hoping that it brings the city into a position of prosperity and that we can clean our house to move the city forward,” Harris said. “I think that’s critical at this time.”